View From The Desk: Growing Need For Dedicated Regulatory Officials In The Front Office

Authored by Marcus Newman and Peter Norton

Historically, the hiring focus in electronic markets, especially in equities, has been on front-office functions such as senior management, product management, sales, execution trading and quantitative research.

In recent years, regulatory changes have caused the diversion of resources away from these roles and toward regulatory and front office control positions.

At Sheffield Haworth, we hear from heads of trading that their focuses has shifted from product enhancement, new business generation and facilitating high-quality trading and client service, to compliance and regulation. In some cases, 40% to 50% of their time is now taken up with regulatory issues and ensuring business areas are compliant. This is mirrored in the case of COO functions, where applicable.

Regulatory considerations are increasingly a core part of business strategy. Key regulations today are impactful in areas such as capital allocation, transparency in illiquid markets, and conduct matters such as the MiFID II inducements regime and how it affects advisory and research services.

Head of Market Structure Strategy, EMEA

Tier-One Bank

We are seeing increased demand for front office-based officials who can navigate these regulations and help business units pre-empt necessary changes. These functions are usually performed by COO or business management roles.

These types of position are not new. However, even in forward-thinking organisations, increasing regulatory presence in the front office is a priority.

Moreover, the need to build CSA divisions has grown as banks tackle new unbundling rules. We have also noted a desire for market structure candidates across equities and FIC in the face of new regulatory constraints. These people are needed to coordinate the departmental strategy, the technical architecture for the future and the development of the business.

While more established within equity markets, we have noticed the need for the same individuals in FIC. Firms with this function in place now are sure to benefit in future.

Increased regulation is affecting the whole of the banking sector. Anticipating these changes and preparing for them is vital to the success and continuity of financial institutions, but it is not always feasible for Heads of Trading to fulfil the regulatory function in addition to their roles.

And it’s not unique to the electronic markets. One of our clients in voice sales and trading reports spending so much time dealing with regulatory issues, that he hardly has time to service his client base.

The sensible way to alleviate this on-going issue is to appoint a dedicate official to take up the vital role of anticipating and preparing for new rules. Candidates can be sourced from the “Big Four”, regulatory reform units, legal and compliance, existing buy- or sell-side firms or even the regulators themselves.